Remarks by the CEO of a mall operator set off a firestorm of speculation in the media and book publishing industry last week about what plans Amazon might have for creating its own bricks-and-mortar bookstore chain.

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Amazon had no comment on Mathrani’s remarks, which were made last Tuesday morning, and the company declined to elaborate when asked how Mathrani knew about Amazon’s plans.

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Asked whether the job postings prove that the company is planning to open more Amazon Books locations, an Amazon spokesperson said the only publicly announced store is the one it opened in Seattle in December.

As with most issues that involve Amazon, publishers were reluctant to discuss what the company may or may not do with Amazon Books, although a few executives did speak for attribution. Sourcebooks CEO Dominique Raccah said she does not think Amazon will look to open hundreds of stores, but believes the most likely course of action is a strategic expansion to showcase its electronics—as well as some books.

Another industry executive, who requested anonymity, said a limited store rollout is the most probable scenario. He said Amazon has to be tempted to do something in physical retail given the success Apple has had in selling its devices through the Apple Store.

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Kensington Publishing CEO Steve Zacharius questioned whether Amazon would open hundreds of stores that focus primarily on selling books that carry low margins, but he observed that if Barnes & Noble, Books-A-Million, or an independent chain announced it would open 400 outlets, “we’d all be jumping for joy.” Given Amazon’s dominant position in selling books, Zacharius said such a large bookstore expansion by the company could be a positive move for the industry—if “the books are sold at a reasonable price, not as loss leaders, so that everybody is competing on a fair basis.”

The head of another midsize independent publisher also pointed to Amazon’s strong market position and concluded that a large Amazon bookstore presence would be “unquestionably bad” for the industry. A big physical store footprint would position the company to take an even bigger slice of consumer book spending, the executive said. This executive feared that, rather than expanding the book market, a chain of Amazon bookstores would make it even harder for B&N to survive—and the survival of B&N is one of all publishers’ top priorities.

PG says if your industry’s future is based upon the survival of B&N, you might want to move to a different industry. And Steve Zacharius made sense for a couple of minutes, then his case of Amazon Derangement Syndrome kicked back in.

There are none blinder than those that refuse to see.
AMAZON BOOKS has been open for three months and their business model is clear for all to see.

The book business is a low margin business?
Not the way Amazon is doing it.
What books is Amazon selling?
1- Select Apub titles. (They get both a traditional publisher’s cut as well as the retailer’s cut.)
2- Select Indie titles? (A fixed 30% cut, no?)
3- Select Tradpub bestsellers. (High volume sellers Wholesaled at something like 50% off.)

Notice the recurring adjective? Select.
Unlike the big box chains Amazon isn’t running a “stock it and they will come, hopefully” store. They are running a curated store stocked with well-reviewed titles that their data-mining tells them should appeal to the local buyers.

Traditionalists keep harping on Amazon prices and talking of books as loss leaders when the real danger of the Amazon Books operation is its targeted stock. An entire store, 5000 titles, picked by the also-bots.

It has long been known that publishing is a Parreto-ish business: the bulk of the profits come from a handful of fast selling titles while the bulk of the floor space is taken up by slow movers. Which means the productive floor space in a typical bookstore is but a fraction of the total. All the harping on Amazon only stocking 5-6000 books fails to consider that by giving each stocked title ten times the room they are increasing the odds of these titles, already fast movers, moving even faster.

Unlike B&N, Amazon books isn’t stuck with 2005 lease rates or even worse, 2001 rates (there is actually a glut of retail space these days that shows no signs of abating).

Unlike Indie stores, Amazon doesn’t get its books from a distributor (who bakes *their* profit into the store’s cost) and a good portion of their stock is going to come from their own businesses, anyway; the individual margins may be low but they pile up.

Finally, naysayers to the contrary, Amazon makes money selling books online despite shipping and packaging costs. Replace those costs with the fixed cost of running a storefront and there will be a sales volume where the “store tax” falls below the UPS (or USPS) home delivery cost.

Theoretically, there is no reason why Amazon can’t make a nice tidy sum selling books (or other dry goods) at B&M as long as they avoid Manhattan, San Francisco, and Brooklyn. 😉

After all, they have the data of who buys what where; if they are looking to spend millions and millions on curated stock stores, their numbers must hint at a decent enough payoff.

Much as we would enjoy it, they aren’t doing it just to annoy their enemies. That is just a bit of frosting on their cake.

“It has long been known that publishing is a Parreto-ish business: the bulk of the profits come from a handful of fast selling titles while the bulk of the floor space is taken up by slow movers. Which means the productive floor space in a typical bookstore is but a fraction of the total.”

Data are data and, without more, meaningless, but Amazon puts statisticians and programmers to work pulling useful information out of the data they have. They are not working with representative samples. They use population samples, which means the fit for their uses is perfect.

If I worked for Amazon, I would lie awake at night thinking about new ways to pull information out of these data. I think Amazon has dived into only the shallows of their ocean of data, but even that little puts the Bezos Brothers giant strides ahead of their competition. I do not think B&N can even find the beach.

Agreed on all counts.
I was just pointing out that having the data is the first step.

And the more data you collect the higher the fidelity of the models that emerge.

Note that while Amazon may indeed have a *goal* of hundreds of stores they are only *planning* for a few dozen. Because they need more data on how the B&M customer is different from the online shopper. Some think that is the *only* reason Amazon is doing the store(s). Or at least the primary reason.

What they have so far, though, lets them leverage their available floor space to maximize sales by focusing on the titles most likely to please the customers and create brand loyalty. As the experiment moves forward they’ll learn more about in-store traffic patterns, repeat buyers, which B&M buyers move to online, etc.

They’ll also learn about the store format itself. I have no doubt we’ll see an Amazon Books 2.0 fairly soon. We might even see a variety of store formats including at least one very small store suitable for strip malls. I doubt they are about to lock themselves in to the one model this early.

“This executive feared that, rather than expanding the book market, a chain of Amazon bookstores would make it even harder for B&N to survive—and the survival of B&N is one of all publishers’ top priorities.”

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Is anyone aware of anything concrete the Big Five (or the AAP) or trad publishers generally, are doing or have actually done to show that the “survival of B&N” is one of their top priorities?

I know there’s been some reform in wholesale pricing (deeper discounts) for stores (or purchases) that give up the automatically-acceptable returns policy. I don’t know if that is actually used by B&N or not.

Don’t forget “vilifying Amazon” and “trying to get the feds to nuke Amazon”.

Just don’t expect them to provide any tangible ($$$) support.

Mostly because the medium and smaller publishers can’t afford it and the big ones that can afford it won’t be allowed to by their overlords. As is, the only thing saving Manhattan from the angst of yet another wave of “redundancies” is the dramatic drop of the euro vs the dollar in 2015 that let them turn 10-12% decline in dollar revenues into 3-5% euro revenue increases.

If B&N should find itself in chapter 11 reorganization in the next couple of years they shouldn’t expect anything different that Borders got: a kick in the rear into chapter 7 liquidation.

I can see Jeff Bezos sitting in his office saying, “you want to make these idiots freak? Let’s start a rumor we’re going to open bookstores. Fifty bucks says Douglas Preston needs a new set of shorts after.”

I’m glad Amazon is expanding to a physical store. While e-books are taking hold more and more, many people still read print books. They might do well opening smaller locations in certain places instead of just doing big box stores.

The worst thing about this rumor is it’s getting up the hopes of local communities. DH and I were out running errands this afternoon, and the local radio station news reader repeated this “news”. He then added that an Amazon store in the town’s dying mall would revitalize the area.

Prediction: in twenty years, Amazon will be considered the savior of big publishing against some new threat, just like Barnes and Noble, which gutted the independent bookstores back in the nineties, is now seen as the savior of big publishing against Amazon.

Actually, the attitude didn’t originate with Amazon at all.
The New York publishers have been warring with their biggest distribution channels for over a century. Nicely documented in this oldie-but-goodie that ends roughly as Amazon was ramping up: